Hon. Zollle Steakley

Secretary of State Hon. Robert S. Calvert Comptroller of PublicAccounts Capitol Station Austin, Texas OPINIONNO. w-806

Re: Authority of the Secretary of State and the Comptroller of PublicAccounts concerning the administrativeprocedure for the forfeiture of the right to do business of a corporation which is delinquent in the filing of its franchise tax report and in the payment of franchise taxes.

Dear Mr. Steakley and Mr. Calvert:

You have inquired of us whether or not authority is vested in the Secretary of State or the Comptroller of Public Accounts concerningthe responsibilityfor the administrativeprocedure for the forfeiture of a corporation's right to do businesswhen the corporation is delinquent in the filing of its franchise tax report and in the payment of franchise taxes.

Prior to the Third Called Session of the Fiftysixth Legislature,Article 7091,V.C.S., as amendedby Acts 1955, Fifty-fourthLegislatureprovided as follows:

"Any corporation,either domestic
or foreignwhich shall fail to pay any franchise tax provided for in this Chapterwhen the same shallbecome due and payable under the provisions of this Chapter, shall thereupon become liable to a penalty of ten per cent (10%) of the amount of such franchise tax due by such corporation. If the reports requiredby Article 7087 or Article 7089 be not filed in accordancewith the provisionsHon.Zollle Steakley and Hon.Robert S.Calvert,page2 (WW-806)

of this Chapter, or if the amount of such tax and penaltiesbe not paid in full on or before the thirtieth day after notice of delinquency Is mailed to such corporation
as provided in Article 7092, such corporation shall for such default forfeit its right to do business in this State; which forfeiture shallbe consummatedwithout judicial ascertainmentby the Secretary of State enteringupon the margin of the record -in his office relatingto such corporation the words, ‘right to do business forfeited' and the date of such forfeiture." (Underscoringadded.)

At the time of the above Act all of the duties with regard to the administrationand collection of franchise taxes were the responslbllltyof the office of the Secretary of State. The Third Called Session of the Fiftysixth Legislaturepassed House Bill No. 11 which Bill is titled in the Statutes 122A-Taxation-General. In Chapter 24, Section 8 thereof, it is provided that this Act shall be effective September 1, 1959. This Act provides under Article 1.04, Paragraph 3 as follows:

"Forthe purpose of carrying out the terms of this Article the Comptroller
or any authorized agent shallhave the authority to examine at the principal or any other office in the United States of any person, firm, agent or corporation permitted to do business in this State, all books, records and papers and also any officers or employees thereof, under oath; and failure or refusal of any person, firm, agent or corporationto permit such examination shall,upon certificationof such refusalby the Comptrollerto the Secretary of State, immediately forfeit the charter or permit to do business in this State until such examination as Is required to be made is completed..." (Underscoringadded.)

Article 12.14 of this sameAct places the responsibility upon the Secretary of State of forfeiting the "rightto do business of a corporation"in the following language:
"Any corporation,either domestic
or foreignwhich shall fail to pay anyHon.Zollie Steakley and Hon.Robert S.Calvert,page3 (WW-806)

franchise tax provided for in this Chapter when the same shallbecome due and payable under the provisions of this Chapter, shall thereuponbecome liable to a penalty of ten per cent (10%) of the amount of such franchise tax due by such corporation. If the reports requiredby Articles 12.08 and 12.09be not filed In accordancewith the provisions of this Chapter, or if the amount of such tax and penaltiesbe not paid in full on or before the thirtieth (30th)day after notice of delinquency is mailed to such corporation, such corporation shall for such default forfeit its right to do business in this State; which forfeiture shallbe consummatedwithout judicial ascertainmentby the Secretary of State entering upon the margin of the record kept in his office relatingto such corporation the words, 'rightto do business forfeited' and the date of such forfeiture..." scoring added.) (UnderLikewise,Article 12.17 of the sameAct places the responsibilityfor the administrative forfeiture of a corporate charter upon the Secretary of State in the following language:

...Upondeterminationby the Secre1" tar of State that any domestic corporation

t to do business has been previously forfeitedby that officer, and which corporation hasfailedand refused to have its right to do business revivedpursuant to the provisions of this Chapter, and which corporation fails to revive Its right.to do business prior to the first day of January next succeeding the date of forfeiture of its right to do business, and which corporationhas no assets from which a judgment for the franchise tax, penalties, and court costsmay be satisfied,and approval of such determinationby the Attorney General, the charter of any such corporation may be forfeited,which forfeiture shallbe consummatedwithout judicial ascertainment by the Secretary of State enteringupon the charter of such corporationsfiled in his office the words, 'Charter forfeited,'givingHon.Zollie Steakley and Hon.Robert S. Calvert,page4 (WW-806)

the date thereof and citing this Act as authority therefor." added.. ) (Underscoring

Article 12.22, the last paragraph of the Act provides as follows:

"When administrationof the franchise tax is transferred from the Secretary of State to the Comptroller of Public Accounts In accordancewith Acts of the Fifty-sixth Legislature,Regular Session, 1959, Chapter 325, all administrative powers and duties incident to collection and administrationof the franchise tax conferredupon the Secretary of State by this Chapter shall devolve upon and be exercisedby the State Comptroller of PublicAccounts."

The question at hand calls for an interpretation of the intent of the Legislature in transferringduties from the Secretary of State's Office to the Comptroller's Officewith particular regard to the extent to which the "administrativepowers and duties" to collect and administer the franchise tax were intendedto be transferred to the Comptroller.

It is noted from the aboveparagraphs that with the exception of Art. 12.22,no provision of this Chapter places any duty on the Comptroller. All duties in Chapter 12 of the new Act are specificallyplaced on the Secretary of State and the Attorney Genera;with the exception of said Art. 12.22, which provides that

...a11administrativepowers and duties incident to collectionand administrationof the franchise tax conferredupon the Secretary of Stateby this Chapter shall devolve upon and be exercisedby the State Comptroller of PublicAccounts."

Nothing in the Act takes away the authority and responsibilityof the Secretary of State to approve a corporate charter, to certify to same under the great seal of the State and otherwiseto literallyauthorizethe creation of a corporation, (seeArt. 1313 V.C.S.) as well
as the authority to keep the actual charter of a corporation.

The "administrativepowers and duties incident to collectionand administrationof the franchise tax" are only a part of the powers and dutieswith regard to theHon.Zollie Steakley and Hon.Robert S.Calvert,page5 (WW-806)

regulation of corporationsand corporatetaxes.

It is the opinion of this office that the powers and duties transferred to the Comptrollerby this Act were limited to those incidentto the collectionof the franchise tax and that it was not the intent of the legislature to take away from the Secretary of State the authority and duty to administrativelyforfeit a corporation'sright to do business. Therefore, the Secretary of Statehas the authority to administer the procedure for the forfeiture of the right to do business of a corporationwhich is delinquent in the filing of its franchise tax report and.is delinquent in the payment of franchise taxes.

SUMMARY

The Secretary of Statehas the authority to administer the procedurefor the forfeiture of the right to do business of a corporation which is delinquent in the filing of its franchise tax report and is delinquent in the payment of franchise taxes. Very truly yours,

WILL WILSON Attorney General of Texas

MHB,Jr:si

APPROVED:

OPINION COMMITTEE W. V. Geppert, Chairman

Robert A. Rowland

C. Dean Davis
Richards

Wells
Houghton Brownlee, Jr. 

# Au--- /a-.

BYMarvin H. Brown, Jr. Assistant

REVIEWED FOR THE ATTORNEY GENERAL
By: Leonard Passmore